Commodity ETP’s, ETF’s and ETN’s, How to use them and why
Commodity ETFs (exchange traded funds) and ETNs (exchange traded notes) are Exchange Traded Products, also known as ETP’s. ETF’s track the price of a single commodity, such as gold or oil, or a basket of commodities by holding the actual commodity in storage, or by purchasing futures contracts. Because futures provide leverage (more exposure than the actual cash invested), ETFs that use futures contracts have uninvested cash, which they usually park in interest-bearing government bonds. The interest on the bonds is used to cover the expenses of the ETF and to pay dividends to the holders. Commodities ETFs that use futures can and have diverged significantly from the price of the hard commodities themselves.
ETNs (exchange traded notes) have to track the price of the commodity closely. Commodity ETNs are non-interest paying debt nstruments whose price fluctuates (by contractual commitment) with an underlying commodities index. Because they are debt obligations, ETNs are subject to the solvency of the issuer.
Commodities-related ETFs generally track the producers of commodities, such as mining companies. While the financial performance of those companies and thus their stocks may be highly leveraged to the underlying commodity, other factors can impact the profitability of production. The ETFs, therefore, may not reflect the performance of the underlying commodity. For example, gold miners are highly leveraged to the discovery of gold deposits, exchange rates and their relationships with the countries where gold deposits are found.
Forex Market Symbols with Leverage ; Dollar Index Double long is UUP , Double Short is UDN, Euro Double long URR , Double Short DRR, Yen Double Long YCL, Double Short YCS.
Simple Forex Market Symbols Japanese Yen FXY, Australian Dollar FXA , Swiss Franc FXF, Mexican Peso FXM , Canadian Dollar FXC , Indian Rupee ICN, Brazilian Real BZF, British Pound FXB, Euro FXE.
Energy related and commodity baskets ETFs ; DEB or ETN UBN, RJN, JJE. Oil is available as a simple long USO, USL, OIL, DBO, OLO, Leveraged long UCO, or Short SZO, DNODouble short DTO, SCO. Simple Longs ETF for Heating Oil UHN. Simple Long for Gasoline UGA. Natural gas is available as an ETF UNL, UNG or ETN GAS.
Precious metals and Baskets DBP, PSAU. Gold is available as a simple long GLD, IAU, SGOL, DGL, and UBG. Leveraged long DGP, UGL, short is DGZ and double short DZZ, GLL. Silver, a simple long SLV, SIVR, DBS, USFV, leveraged long AGQ and double short ZSL position. Platinum simple long; PPLT, PTM, PGM and short PTD. Palladium comes only as a simple long PALL. ETFs containing gold and silver related stocks – the gold miners and junior gold miners GDX, GDXJ.
Broad commodity indexes/ baskets GCC, GSG, DBC and ETNs UCI, GSC, DJP, GSP. Leveraged broad commodity ETF UCD, a leveraged broad commodity ETN DYY, and a double-short broad commodity ETF CMD and ETN DEE. ETFs which track the stocks of companies in the agricultural commodity business are CUT, MOO.
Industrial commodities ETN’s are Aluminum JJU, Copper JJC, Lead LD, Nickel JJN Tin JJT.
Industrial metal baskets are also available via ETF DBB and ETF UBM, JJM, RJZ. ETFs are available which track the stocks of companies in the industrial commodities business PKOL, KOL, SLX, HAP.
Remember , the commodity ETP’s known as ETFs (exchange traded funds) attempt to track the price of a single commodity, such as gold or oil, or a basket of commodities by holding the actual commodity in storage, or by purchasing futures contracts. Because futures provide leverage (more exposure than the actual cash invested), ETFs that use futures contracts have uninvested cash, which they usually park in interest-bearing government bonds. The interest on the bonds is used to cover the expenses of the ETF and to pay dividends to the holders. Commodities ETFs that use futures can and have diverged significantly from the price of the hard commodities themselves. ETNs have to track the price of the commodity closely. Commodity ETNs (exchange traded notes) are non-interest paying debt instruments whose price fluctuates (by contractual commitment) with an underlying commodities index. Because they are debt obligations, ETNs are subject to the solvency of the issuer.